Analyzing the Mayor's Housing Plan - Part 3:

Building New Affordable Housing for all New Yorkers – Finding the Balance

This is the third of five blog posts analyzing Housing New York, the Mayor’s new ten-year plan for affordable housing development, chapter-by-chapter. This week focuses on Chapter Three: Building New Affordable Housing for all New Yorkers.

There are two components to building new affordable housing – the “building” part, and the “affordable” part. The de Blasio housing plan lays out how these two things will go together in tandem. But has the plan struck the necessary balance?  It is critically important that the housing we build be appropriate for the needs of the city. Building the right kind of housing helps the New Yorkers who most need it, and also to maintain the support among the public for a robust affordable housing program, and indeed, development overall.  In order to maintain this support, we have to be building housing most people actually want and need. We have only to look to San Francisco, which recently passed a referendum by an overwhelming margin limiting development along the waterfront, to see how voters can react when they see the vast majority of new development being reserved only for the very wealthy.

The 3rd part of the de Blasio housing plan promises to take on some exciting challenges to make sure that the affordable housing it actually affordable, but does the plan strike the right overall balance as it seeks to energize the market?

It’s clear from reading Housing New York that the administration views making sure the “building” part happens as the most critical piece of the puzzle. Several of the proposals are dedicated to providing ease of development for housing construction overall, and it’s clear that that administration sees itself as responsible for increasing not just affordable housing production, but all housing production. From streamlining interagency coordination on permitting and approvals, to speeding the City’s  environmental review process, to committing to reducing construction costs, to easing rules for conversion of older non-residential buildings to residential use, to changing zoning rules to spur development, many of the changes the plan proposes can be applied to developing market-rate, as well as affordable, housing.

The new proposed zoning rules are especially interesting. One is modifying “tower-in-the-park” zoning rules, to allow for more development on open space in these types of developments. This seems most applicable to adding development capacity to NYCHA campuses, but could also allow for more development in places like Co-op City and Stuyvesant Town. While parking lots currently make up much of the open areas in these types of campuses, and may be appropriate for more housing, care should be taken to tailor the zoning proposal to protect parks, playgrounds, and otherwise actively utilized open space and public amenities. Another proposal that has significant support not only from housing advocates but also from transportation advocates is reducing the parking requirements for affordable housing in otherwise transit-rich areas. A third is to implement a pre-certification timeline, to give greater predictability and transparency to the pre-certification process for zoning changes and other land-use applications, and, for the first time, support e-filing of land-use applications.

A fourth, and very significant proposal involves reforming the zoning rules to allow for greater density among residential development in high-density areas. Currently, residential developments are capped at a Floor Area Ratio (FAR) of 12, while commercial buildings are allowed to build denser if zoning allows. This proposal would remove the 12 FAR cap on residential development (and would need action by the New York State legislature).

This proposal is geared to dense, central areas like Midtown Manhattan. Allowing for denser and higher buildings in these areas increases the value of the development enormously. Not only because the buildings are larger overall, but also because of new engineering changes, these buildings can be counted on to be taller as well. Considering that each floor of a new building with a commanding view of Central Park can be counted on to be sold for several tens of millions of dollars in the current market, the amount of affordable housing in these development s needs to be truly significant to balance the value given by this rule change. It is not enough to negotiate more affordable housing on a deal-by-deal basis in these cases, even if this administration negotiates for the maximum amount of affordable housing in each case. There will be construction beyond this administration, but the added value given by this rule change will be permanent. Eliminating the 12 FAR cap needs to be accompanied by changes guaranteeing that the larger buildings have a significant affordable component.

A new and greater affordability guarantee in these 12 FAR+ supersized buildings is necessary because making it easier to build is only one piece of the affordable housing development puzzle. It is true that we need to allow the construction of more housing to accommodate a growing City population. But we know from the experience of the unbridled growth of the past 12 years that building market-rate housing is not a neutral act. In most City neighborhoods, building new market rate housing brings in an increase in higher-income renters, which creates a cascade of secondary displacement effects on the local housing market that increase pressure on low- and moderate-income renters in the surrounding area. So, we don’t just need a guarantee of affordable housing as part of the new developments in order to meet the existing affordable housing need, we a new and greater guarantee because the market rate housing actually makes the underlying problem worse.

And the common assertion that we need more market-rate development as well as affordable housing development, or that increasing luxury development somehow helps our affordability crisis, is questionable. In the most recent New York City Housing and Vacancy Survey, the vacancy rate for housing renting for $2,500 or more – the current luxury decontrol limit and just above the “middle-income” limits – is at 5.26%. This is healthy vacancy rate, and comparable to that of cities like Charlotte, Cincinnati, and Indianapolis. It is more[b1]  than twice the vacancy rate of housing in New York renting for less than $1000, or at about the “low-income” range. It is clear at what rental level we need housing in New York, and with virtually all new market rate housing being developed renting for above – and often well above – $2500 dollars a month, it’s also clear that the market supply is not remotely matching the market demand.

Any new rules change that encourages housing production need to be tightly governed, and concretely linked to affordable housing in every case. We have already established this with Inclusionary Zoning – any upzoning is now expected to include Mandatory Inclusionary Zoning, guaranteeing affordable housing is constructed. The same needs to be true of other zoning changes that allow developers to build tall and dense and add value to their building.

Encouraging any and all housing development in the hopes that some will be affordable is not enough. In the best of cases, the city is forced to oversubsidize the affordable development, and in the worst case no affordable housing gets built at. When the city provides new value for developers, an affordable component has to be required as part of the development – period.

There are many programs in the plan designed to specifically spur affordable housing development by leveraging the two major components of affordable housing development that the City controls- money and land. The city is committing to a major funding increase for affordable housing (we will blog about the details on this in two weeks), and is also working on finding more sites for affordable housing. We are no longer the city of the 1980s or 1990s, or even the 2000s, when vacant, city-owned land and buildings provided ample pipeline for affordable housing development. Finding sites to support 80,000 units of affordable housing is now a real concern. The city is looking at many places that were not previously considered as possible development sites – NYCHA campuses, smaller or underdeveloped city-owned sites previously considered more difficult to build on, and sites that need infrastructure work or brownfield remediation.

Because building affordable housing on these types of sites will be more expensive than in the past, the additional capital commitment is a welcome component. And it will be needed. Because the subsidies needed for smaller affordable buildings are so high, the temptation will be to build market rate or higher-income affordable housing on these sites. Already, the plan calls for only 1/3 of the developments in its new NIHOP program on small sites to be affordable. While finding sites for new housing is important, it has to be balanced with both affordability and other community concerns. There are many of these sites where a community could be better served by utilizing it as open space or other community uses, rather than building just a few, expensive, housing units.

As far as the “affordable” part of “building affordable,” what type of affordable housing is going to be built under this plan is another thing to focus on. And, in a welcome shift from the last administration, for the first time goals and metrics regarding housing affordability – not just housing production – have been explicitly stated.

The city is committing to building more housing for those who have been largely left out of the last plan, by spreading affordability both down, to more very- and extremely-low income households, and up to more moderate- and middle-income households. In many cases, the middle-income housing will be used to cross-subsidize the very low-income housing, providing opportunities for a wider range of households without affecting overall building income. Overall, the city is committed to building 11% middle-income, 11% moderate-income, 58% low-income, 12% very low-income, and 8% extremely low-income.

It should be noted that, the city is continuing to use the skewed definitions of “low-income” provided by the federal government, where 53% of New York City is technically low-income. In reality, low-Income and even very low-income housing is workforce housing, needed by households working one, often two, full-time jobs. Even at the living wage of $10.00 an hour, a family of four with two full-time working adults still don’t make enough to qualify for low-income housing.

It is an unfortunate reality that many of the changes needed to be able to build more truly affordable housing need come on the Federal level. As a result, even with the city commitment to reaching underserved populations, the levels of affordability in the plan are not a huge departure from the last administration. Extremely low-income housing will increase from approximately 3% to 8% of total development, and there are some other small differences, but overall the city remains fairly constrained by the rules set by the Federal, and to a lesser extent the State, governments. There are, however, several innovated proposals, most notable a new M2 program, which seek to build mixed-income developments under current rules. The new M2 developments will contain 50% middle-income, 30% moderate-income, and 20% low-income housing. If the purpose of these are to replace current 80/20, or even 50/30/20 developments where the 50 % is market and the 30% middle-income, in high-income areas it will be a net plus for affordability in the city. However, if these are mostly utilized in gentrifying areas in lieu of 100% affordable developments, then their impact will be questionable.

There are other ways that income-spreading can be introduced as well though, without the need for changes on the federal level. For instance, the city can introduce income spreading in non-basis tax-credit units, and could perhaps make changes to programs like Inclusionary Zoning or even 421a to introduce them as well. And in addition to cross-subsidization in a single development, the city could create a cross-subsidization pool overall – taking excess cash flow from more lucrative affordable housing developments and using it to subsidize truly affordable housing elsewhere on an operational basis.

Building for current demographics is also a focus of the new housing plan. This is already addressed in part by the administration’s recognition that affordable housing production must focus on a broader range of New Yorkers, especially our very-low income New Yorkers. The other demographics that are addressed are mostly on the household-size spectrum.

The most talked about program addressing building to city demographics is the microunit program. Smaller microunit housing is only an efficient public policy if there is a corresponding decrease in rent to go along with the decrease in size. In the City’s first microunit project, on the east side of Manhattan, the rents – including half of the “affordable” rents – were not only unaffordable, but, on a per-square foot basis, were actually more expensive than the market rents for the neighborhood, which is one of the most expensive in New York.  Future projects addressing the demographic needs in New York need to also take in to account the most important demographic of New Yorkers as well – the 54% of New Yorkers that are rent burdened, a number which has grown continuously since 1991.

In addition, when examining how to build to the demographic need, we should be looking deeper as well – not just at the population overall, but at the population in that neighborhood, and in that income range, that needs housing. Our single-person households, for instance, are disproportionately elderly and low-income, and new studio apartments should reflect that fact, while working families making incomes appropriate for tax-credit level housing, might need proportionately larger apartments.

It is clear from the new plan that there will be development – significant development – in New York over the next ten years. But all development is not created equal. It is an easy temptation to “unleash the cranes” and pray for the best. But without those cranes building the kind of housing New Yorkers can actually afford, we will do nothing but exacerbate our current inequality. It will be the city’s job over the course of the plan to make sure that we don’t just build, but build smart, build affordable, and truly build housing for all New Yorkers.

ANHD’s blog schedule on the Mayor’s Housing Plan:

• Wednesday, May 28th:  Fostering Diverse, Livable Neighborhoods
• Wednesday, June 4th:  Preserving the Affordability and Quality of the Existing Housing Stock
• Wednesday, June 11th (Revised – Thursday, June 12):  Building New Affordable Housing for All New Yorkers
• Wednesday, June 18th:   Promoting Homeless, Senior, Supportive, and Accessible Housing
• Wednesday, June 25th:  Refining City Financing Tools and Expanding Funding Sources for Affordable Housing